Stocks will likely take a breather today following the strong
gains on Thursday that helped them reach new highs. The Thursday
gains followed a slew favorable domestic economic reports and
renewed optimism on the Greek bailout issue.
This morning's benign inflation reading and reports of
Congressional agreement to extend the payroll tax cut may not be
enough power stocks higher. But this rally defied predictions thus
far, so I wouldn't be overly surprised if stocks start heading
higher later this afternoon ahead of the President's Day weekend.
The Consumer Price Index (
CPI
) for January came broadly in-line with market expectations, up
0.2% on the 'headline' after December's 'unchanged' reading. 'Core'
CPI, which strips out food and energy, also matched expectations,
up 0.2% after the 0.1% increase in December. The year-over-year
readings were 2.9% for the 'headline' and a tad hotter for the
'core' reading at 2.3%. In December, the year-over-year CPI
readings were 3% and 2.2% for the 'headline' and 'core,'
respectively.
Any way you look at the inflation numbers, it doesn't seem to be
problematic. The Fed pays close attention to the inflation picture,
but its statement following the January FOMC statement
characterized price pressures as 'subdued.' Today's CPI reading not
only confirms the Central Bank's assessment, but also leaves open
the door for further quantitative easing should conditions warrant.
Minutes of the last Fed meeting released earlier this week showed a
divided FOMC on the need for additional quantitative easing. But
the fact remains that the committee has supporters of further
easing.
We will also get the Conference Board's Leading Economic Indicators
for January, but the release is unlikely to be a major market mover
today. In another favorable development, Congress appears on track
to extend the payroll tax cut for the rest of the year, on an
unusually bipartisan basis. Please recall that the earlier
three-month extension late last year followed an extremely noisy
and rancorous debate. In addition to the tax cut extension, the
package includes extended unemployment benefits, and a Medicate
reimbursement fix.
On the earnings front, we have positive surprises from
H.J. Heinz
(
HNZ
) and
Campbell Soup
(
CPB
) this morning. But
Pilgrim's Pride
(
PPC
), the chicken processor, missed expectations.
Applied Materials
(
AMAT
) came out with better than expected results after the close on
Thursday.
APPLD MATLS INC (
AMAT
): Free Stock Analysis Report
CAMPBELL SOUP (
CPB
): Free Stock Analysis Report
HEINZ (HJ) CO (
HNZ
): Free Stock Analysis Report
PILGRIMS PRIDE (
PPC
): Free Stock Analysis Report
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